The Federal Trade Commission received more than 2.1 million fraud reports from consumers in 2020. With fraudulent activity and identity theft reports on the rise, what are you doing to protect your personal information? Should you pay for a credit monitoring service or simply DIY?
One way to stay on top of fraudulent activity is by routinely observing your credit reports and scores. Vigilance pays off. For example, fraudsters can set up a credit card in your name and make purchases for themselves, and you may not find out until months or years later if you are not keeping watch! While it is possible for consumers to catch fraudulent transactions independently, many third-party companies now offer credit monitoring services.
What Are Credit Monitoring Services?
You’ve likely seen ads and commercials for several different credit monitoring companies. Even the three credit bureaus – Experian, Equifax, and Transunion – offer their version of monitoring. Credit monitoring is similar to a home security system, alerting homeowners of suspicious movements or intruders on their property. A credit monitoring service similarly notifies consumers of suspected fraudulent activity on their credit reports.
Types of fraudulent activities include:
- New accounts or lines of credit opened in the consumer’s name.
- Line of credit balance changes.
- Name and address changes.
- Personal information found on the dark web.
Credit monitoring solutions vary in pricing, ranging from complimentary services up to $40 per month. Some services also offer identity theft insurance protection if you end up losing money as a result.
Important Caveats to Credit Monitoring Services
While credit monitoring services generally have a great reputation, it is important to understand some of the limitations involved. Consumers should be aware that enlisting the help of a monitoring service by a third party will not prevent fraud from occurring. Similarly, if fraud does occur, it’s the responsibility of the consumer to take steps to alert the relevant institutions and correct the situation. The main service provided by credit monitoring companies is purely alerting a consumer that suspicious activity and fraud have occurred.
The caveats listed are not to say monitoring services aren’t valuable. They certainly can be! If you are not willing to check your credit report and scores on a routine basis, then enlisting the help of a reputable company could be a great option. As always, you’ll want to make sure you read the fine print of any service you are signing up for. Make sure the service provides monitoring of credit reports at all three bureaus, not just one or two!
DIY Credit Monitoring
Consumers can monitor their credit, often at a low cost or for free. Reviewing your credit reports (you get one free report per year from each of the three agencies at www.annualcreditreport.com) along with monitoring your credit score and reviewing credit card and bank account transactions regularly are ways consumers can monitor for themselves. In addition, setting up automatic alerts for when personal information is changed or transactions are made is a simple, easy, and free way to keep watch of bank accounts and credit cards.
Aside from reviewing your credit reports and accounts regularly, one of the best preventative measures you can take against identity theft is freezing your credit. If you freeze your credit, no one can open an account or line of credit in your name (including you). To freeze your credit, you’ll need to contact each of the three credit bureaus online or by phone, provide them with some personal information to confirm your identity, and confirm you would like to install a credit freeze. Be sure to store your password or PIN for each credit bureau because you will need this information in order to unfreeze your credit if you want to open a new account or apply for a loan.
Other easy ways to protect personal information include:
- Practice caution when sharing personal information online.
- Create complex passwords and store them in encrypted software.
- Establish multi-factor authentication and verbal passwords for accounts when available.
- Use a designated device to access your online financial accounts.
- Shred documents with personal or financial information.
- Establish your my Social Security account online.
Protecting your financial information is extremely important. Credit monitoring companies provide useful services if you want to outsource the task. However, if you’re more of the hands-on type, be sure to freeze your credit or pull your free reports.
Abby VanDerHeyden is a Wealth Advisor with Bedel Financial Consulting, Inc., a wealth management firm located in Indianapolis. For more information, visit their website at www.bedelfinancial.com or email Abby at AVanDerHeyden@bedelfinancial.com.